|Select Economic and Financial Indicators||2014||2015||2016||2017e||2018f|
|Real GDP (% change)||4.2||4.0||5.9||7.5||7.3|
|GDP (USD bn)||12.3||11.2||12.1||13.2||14.7|
|Fiscal Balance (% GDP)||-2.0||-2.2||-3.3||-5.5||-4.6|
|Broad Money (% change, end period)||11.3||19.7||11.9||12.0||9.9|
|Exports (USD bn)||3.2||2.8||3.1||3.4||3.7|
|Imports (USD bn)||4.3||3.8||4.1||4.5||5.0|
|Current Account Balance (% GDP)||-8.0||-8.0||-6.8||-7.2||-7.1|
|FX Reserves (USD bn, end period)||0.3||0.2||0.3||0.2||0.3|
|Exchange Rate (average)||496.08||594.27||600.68||588.92||565.09|
Real GDP: Economic growth is set to remain strong over 2018, which we estimate at 7.3% (2017e: 7.5%) largely driven by higher mining output. Specifically, we expect sustained expansion in gold production following the start of two gold mines central to continue to underpin an increased growth outturn. In addition, we expect increased investment in public infrastructure under the five year Plan National de Développement Economique et Social (PNDES) to bolster activity in the tertiary sector. Furthermore, in the light of improved rainfall and recent progress in improving irrigation infrastructure for farming, we believe that expansion in the agricultural sector will be supportive of headline growth. In all, we expect the momentum to be maintained over 2018, as the government remains committed to the PNDES plan and undertaking structural reforms with the IMF in line with the ECF facility.
Inflation: In 2018, pass-through from higher oil prices to transport (13% of the index) poses upside risks to inflation. However, we expect continued gains in irrigation and food production to drive subdued food inflation (37% of the index) which will keep inflation under 1% in 2018 (2017: 0.4%). However, the fuel price pressures will remained contained as we see a strengthening bias to the EUR (and hence the XOF) which will keep overall inflation expectations remain well anchored within the UEMOA convergence target of 3% inflation.
Fiscal balance: In the proposed 2018 budget, the Burkinabe government has maintained a broadly expansionary fiscal stance with a projected 6% y/y rise in fiscal spending to XOF2.43trn. Consistent with the five year PNDES, capital expenditure is set to account for 45% of total spending while recurrent expenditures also rise in line with adjustments to the public wage bill. To fund the budgeted outlay, the government of President Christian Kabore expects to raise fiscal revenues by 13% to XOF2.01trn driven by higher tax receipts, which are projected to rise 23% to XOF1.8trn. The government has announced new fiscal measures which include a hike in tobacco tax to 45% alongside other luxury taxes. The improved revenue outlook informs a moderation in projected fiscal deficit to 4.6% of GDP for 2018 (2017e: 5.5%). As in 2017, the deficit will be financed via increased debt issuance in the regional bond market given Burkina Faso’s low debt level and debt-service to revenue ratio.
Current account: Relative to prior years, we are more optimistic over export outlook as rising gold output, which should buoy gold exports (63% of exports) points to higher total exports. In a similar vein, we expect favourable weather conditions to buoy outlook for cotton (17% of exports). On the import side, though oil and capital imports are likely to rise in line with higher prices and increased public infrastructure spending. Largely reflecting the positive export picture informs prospects for a softer current account deficit in 2018 to 7.1%. (2017e: 7.2%).
Key risks are the relatively fragile political situation in Burkina Faso, with a failed coup attempt in October 2016, and sporadic terrorist attacks given the unstable security situation along its borders with Niger and Mali. In addition, given its proximity to the Sahara desert, adverse weather conditions pose downside risks to agriculture. Furthermore, given the sizable share of gold and cotton in overall exports, sudden declines in commodity prices could hurt export and fiscal revenues leading to under-execution of public investment programs.
Exchange Rate Structure
|Target||XOF655.957 to EUR1|
|Type of intervention||Via Central Bank|
|FX Products||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Daily trading volume (USD mn)||n/a||n/a|
|Average trade size (USD mn)|
|FX Market Structure||BCEAO’s exchange regime is free of restrictions on payments and transfers for current international transactions, apart from restrictions maintaned for security.|
|Non-resident FX Regulations||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Trade and FDI flow||No restrictions||n/a|
|Resident FX Regulations||Spot||Forwards||Non-deliverable Forwards||Options||Swaps|
|Trade and FDI flow||No restrictions||n/a|
|Primary Market||Treasury bills||Treasury notes||Treasury bonds||Central Bank bills||OMOs|
|End use||Government financing||n/a||Government & infrastructure financing||n/a|
|Maturity structure||7-days to 2-years||3- to 10-yrs|
|Coupon payments||n/a||Annual & Semi-annual|
|Daily trading volume||Limited trading||n/a|
|Average trade size||Limited trading|
|Ecobank local affiliate contact details:|
Ecobank Burkina Faso, 49, Rue de l’Hôtel de Ville, 01 BP 145 Ouagadougou 01
Tel: +226 25 33 33 33 / 25 49 64 00
|Burkina Faso Debt||2014||2015||2016||2017e||2018f|
|Government debt (% GDP)||30.6||32.5||32.5||33.3||33.6|
|External debt (official creditors, % GDP)||20.4||23.3||22.8||23.1||23.0|
|External public debt stock (USD bn)||2.5||2.6||2.7||2.8||3.0|
|Share of total sub-Sahara debt (%)||1.0||1.0||0.9||0.9||0.9|
Hydrocarbon & mineral production
In recent years Burkina Faso has emerged as West Africa’s third largest producer of gold (after Ghana & Mali), with estimated output of 45 tonnes in 2017. Major investment continues in expanding production of gold, along with other minerals such as zinc (169,000 tonnes produced in 2016) and lead (2,000 tonnes).
Burkina Faso has no known or discovered hydrocarbon reserves. The country consumed an estimated 962,000 tonnes of petroleum products in 2016, almost half of which were diesel. Although Burkina Faso has no refinery of its own, the government holds a 5.39% share in Cote d’Ivoire’s Société de Ivoiriene de Raffinage (SIR). According to the WTO, the country imported petroleum products worth US$666m in 2016, re-exporting a proportion of these to neighbouring countries (notably Mali & Senegal).
Soft commodity production
Burkina Faso is West Africa’s leading cotton producer, with estimated output of 283,000 tonnes of cotton lint in 2016/17. The sector is dominated by the semi-private parastatal, Société Burkinabè des Fibres Textiles (Sofitex), which is active throughout the cotton value chain, from collection to ginning and shipment. The introduction in 2008 of genetically-modified Bt cotton and a steady increase in planted area significantly drove up production. However, concerns over the fibre length and quality of the variety of Bt cotton used in Burkina Faso forced the government to switch back to conventional seed varieties, which is expected to lower output to a forecast 233,000 tonnes in 2017/18. As a result, Burkina Faso is likely to cede its position as Africa’s largest cotton producer to neighbouring Mali. Burkina Faso is also a significant producer of sesame (95,000 tonnes in 2017) and cashew nuts (86,000 tonnes), all of which are exported raw to world markets, and in 2016 the country produced 244,000 tonnes of milled rice, mostly for domestic consumption.
Burkina Faso’s imports totalled US$3.4bn in 2016, 9% higher than the previous year. As the country has no refining capacity, it is entirely reliant on imports of petroleum products, worth US$666mn in 2016, most of which come from neighbouring African countries. Burkina Faso is heavily dependent on imports of machinery, vehicles, electronics and pharmaceuticals (together worth US$1.1bn in 2016), reflecting the poorly developed manufacturing sector and the country’s role as a re-export hub for its landlocked Sahelian neighbours. Burkina Faso also imports large volumes of rice and wheat, worth US$147mn in 2016, along with iron & steel (US$260mn), fertilizer (US$133mn) and cement (US$107mn).
Burkina Faso’s exports totalled US$2.5bn in 2016, 13.6% higher than the previous year. Since 2009 gold has been Burkina Faso’s most valuable export, worth US$1.6bn in 2016 (15.4% higher than the year earlier), most of which went to Switzerland, India and South Africa. Gold has eclipsed Burkina Faso’s traditional export, cotton, which totalled US$423mn in 2016, most of which went to Western Europe and South-East Asia. The country also exported US$89mn worth of zinc, all of which went to Côte d’Ivoire. Burkina Faso’s key soft commodity exports are oil seeds (US$155mn in 2016) and cashew nuts (worth US$115mn), most of which went to Singapore and Vietnam. The country also acts as a re-export hub for machinery & vehicles (US$50mn) to other landlocked countries in the Sahel.